Michael Pettis — Some things to consider if Spain leaves the euro

More about the situation in the EZ and Germany in particular than just Spain. He covers a lot of ground. He says one particularly curious thing:

Policies in Germany around 2000 aimed at improving Germany’s international competiveness did so by forcing down wage growth and, with it, household consumption growth. For reasons about which I am not sure it seems that investment growth also slowed dramatically, compounding the problem of weak household consumption growth.

Seems obvious that lower wages means less aggregate demand which results in less investment with growing unplanned inventory sending a signal to either cut back or find other markets. At this time Germany switched from a deficit to a surplus, expanding exports to offset lagging domestic demand. Germany would not have needed to increase investment in aggregate if it already had the capacity to fill orders in the global market. Investment responds to demand. China Financial Markets  Some things to consider if Spain leaves the euro Michael Pettis